Xerox Corporation v. Graphic Management Services Inc. et al

Filing 72

-CLERK TO FOLLOW UP- DECISION AND ORDER denying 59 Motion for Partial Summary Judgment as moot; granting 68 Motion for Default Judgment consistent with this Decision and Order. (Clerk to close case.) Signed by Hon. Michael A. Telesca on 8/7/14. (JMC)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
________________________________________
XEROX CORPORATION,
Plaintiff,

11-CV-6397

v.
DECISION
AND ORDER

GRAPHIC MANAGEMENT SERVICES, INC.,
GRAPHIC MANAGEMENT SERVICES INC.,
MHW, INC., AND DAVID TABAH
Defendants,
________________________________________

INTRODUCTION
Plaintiff Xerox Corporation (“Xerox”) brings this
action against defendants Graphic Management Services,
Inc.,

Graphic

(“MHW”)

and

Management

David

Tabah

Services
(“Tabah”)

Inc.,

MHW,

claiming

Inc.,

that

the

defendants breached two lease agreements and one purchase
agreement

pursuant

commercial
defendants.

printing

to

which

Xerox

equipment

Specifically,

and

Xerox

leased

and

supplies
claims

sold

to

the

that

the

defendants failed to make their lease and other payments
as required under the agreements.
After initially failing to appear, and having an
entry of default entered against them by the Clerk of the
Court, the defendants answered the plaintiff’s Complaint,

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and asserted several counterclaims against Xerox.

By

Order dated July 17, 2013, I dismissed all but two of the
defendants’

counterclaims,

and

granted

plaintiff’s

motion for summary judgment on the issue of defendant
MHW’s liability under the lease and purchase agreements.
Specifically, I held that the agreements entered into by
Xerox and HMW were valid and binding, and obligated HMW
to pay the agreed-upon lease payment amounts.
Having found defendant HMW liable for payments owed
under the lease and purchase agreements, I ordered the
parties to proceed with discovery on the issue of damages
to which Xerox was entitled.

I further ordered that the

plaintiff could proceed on its personal claims against
defendant

Tabah,

(who

controlled

MHW)

and

that

the

defendants could proceed with their counterclaims against
Xerox

for

breach

of

contract

and

revocation

of

acceptance.
Thereafter,

according

to

the

plaintiff,

the

defendants refused to engage in discovery, and defendant
Tabah refused to be deposed.

On January 22, 2014, local

defense counsel moved to withdraw as counsel for the
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defendants on grounds that Tabah had discontinued all
communication with counsel.

By Order dated February 24,

2014, United States Magistrate Judge Jonathan W. Feldman
granted

local

counsel’s

motion,

and

directed

the

defendants to have new local counsel appear in the action
no

later

than

March

7,

2014.

Although

defendants

continued to be represented by attorney Marshall Sanders,
a member of the California Bar admitted for this action
pro hac vice, the Court required defendants to retain
local counsel as required by Rule 83.2 of the Local Rules
of the United States District Court for the Western
District of New York.
Defendants, however, have failed to retain local
counsel.

According to attorney Sanders, MHW has gone out

of business and has no assets from which a judgment could
be paid.

Nor have the defendants responded to Xerox’s

pending motion for summary judgment on the issue of
damages,

which

was

filed

in

December,

2013,

while

defendants were still represented by local counsel.

As

a result of the defendants’ failure to respond to Xerox’s
motion, and failure to appear with local counsel as
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Ordered by this Court, Xerox now seeks an entry of
default against the defendants, and dismissal of the
defendants’ remaining counterclaims.

Plaintiff does not

seek a monetary judgment at this time, but asserts that
it will submit proof of damages should the Court enter a
default against the defendants.
untimely

filing

with

the

Attorney Sanders, in an

court,

seeks

permission

to

proceed as counsel for the defendants without retaining
local counsel, and asks the court on behalf of the
defendants for additional time to complete discovery.
According

to

Sanders,

defendant

Tabah

was

recently

diagnosed with a malignant cancer and has been unable to
effectively assist with the preparation of his case.
For the reasons set forth below, I grant plaintiff’s
motion for an entry of default against all defendants.
In addition to granting plaintiff’s motion for default,
I

grant

plaintiff’s

counterclaims.
judgment

as

motion

to

dismiss

defendants’

I deny plaintiff’s motion for summary

moot,

and

I

deny

proceed without local counsel.

Page -4-

defendants’

motion

to

BACKGROUND
This action was commenced on August 15, 2011.
September

6,

2011,

the

plaintiff

filed

an

On

Amended

Complaint, and Xerox served all defendants on or before
September 13, 2011.

No defendant answered the Amended

Complaint, and on October 4, 2011, plaintiff moved for an
entry of default against all defendants.
On October 5, 2011, the Clerk of the Court issued an
entry

of

default

against

defendants

Tabah,

MHW,

and

Graphic Management Services, Inc. On November 3, 2011,
the Clerk of the Court issued an entry of default against
defendant Graphic Management Services Inc.1
More

than

one

month

after

the

initial

entry

of

default was issued against defendants Tabah, MHW, and
Graphic Management Services, Inc., on November 11, 2011,
attorney Marshall Sanders filed a motion to appear pro

1

The Amended Complaint identified two defendants almost
identically. One defendant is identified as “Graphic
Management, Inc.” and another as “Graphic Management Inc.”--the
only difference between the two being the insertion of a comma
after the word “management” in one of the captioned names.
According to the Amended Complaint, plaintiff named both entities
because it was not clear as to whether or not the entity
“Graphic Management, Inc.” used a comma in its corporate name.
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hac vice on behalf of all defendants.
moved

to

vacate

the

defaults

that

Defendants then
had

been

entered

against them, and by Order dated December 15, 2011, I
granted the defendants’ motion.
Thereafter, the defendants sought (and obtained) an
adjournment of a scheduling conference on grounds that
they

sought

Xerox.

to

pursue

settlement

negotiations

with

By letter to the Court dated March 5, 2012,

defendants stated that they would “prepare information to
be

submitted

discuss

the

to

Xerox’s

possibility

submissions were made.
Paul

Leclair

According

to

counsel”

to

the

Xerox,

of

and

would

settlement

further

after

the

See March 5, 2012 Letter from
Court

(docket

however,

the

item

no.

defendants

36).
never

submitted the promised information. See May 31, 2014
Declaration of Tony Sears at ¶ 11 (docket item no. 68-1).
As

a

result

of

the

adjournment

of

the

scheduling

conference, no scheduling order was issued in this matter
until November, 2013, more than two years after the
initial Complaint was filed.

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Despite no discovery having taken place, plaintiff
moved for summary judgment on the issue of defendant
MHW’s liability under the uncontested agreements that MHW
entered into with Xerox.

By Order dated July 17, 2013,

I granted plaintiff’s motion and held that defendant MHW
was liable to Xerox for payments under the lease and
purchase agreements, and further held that Xerox could
proceed with its individual claims against defendant
Tabah.

I directed the parties to proceed with discovery

on those claims, and also on defendants’ claims for
breach of contract and revocation of acceptance.

On

November 22, 2013, the Court issued a Scheduling Order
requiring, inter alia, that mandatory initial disclosures
be made by December 19, 2013.

Less than one month later,

Xerox moved for summary judgment against MHW on the issue
of damages.
Defendants,
initial

however,

disclosures,

never

and

produced

never

the

responded

plaintiff’s motion for summary judgment.

required
to

the

Instead, by

motion dated January 3, 2014, and amended motion dated
January 22, 2014, local counsel moved to withdraw its
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representation

of

all

defendants

on

grounds

that

defendant Tabah, the principal in control of MHW, refused
to communicate with counsel, or in anyway assist with the
defense of the claims made by Xerox or prosecution of the
defendants’ counterclaims.

Specifically, counsel stated

that:
The basis for the motion is that Mr.
Tabah, the individual defendant and the
principal of the corporate defendants,
will not communicate with me. For the
past two months, I have made diligent
and repeated efforts to contact Mr.
Tabah. I have left phone messages and
sent him electronic mail (employing
methods
I
have
normally
used
to
communicate with him in the past)
advising him that [counsel] cannot
continue to represent him unless he
communicates with me. Nonetheless, he
has not returned my messages or made any
attempt to communicate with me.
Affidavit

of

Paul

Withdraw at ¶ 4.

LeClair

in

Support

of

Motion

to

Tabah did not controvert counsel’s

allegations, and on February 24, 2014, Magistrate Judge
Feldman granted counsel’s motion to withdraw, and Ordered
defendants to retain new local counsel on or before March
7, 2014.

Page -8-

Defendants failed, however, to appear with new local
counsel

by

March

7,

2014,

and

failed

to

additional time to retain new local counsel.

request

Nor did the

defendants respond to plaintiff’s interrogatory requests,
requests

for

production

of

documents,

requests

for

admissions, or notice to take the deposition of defendant
Tabah.

Although the defendants were required to respond

to the plaintiff’s requests on or before April 14, 2014,
the defendants never did so, nor did they request an
extension of time to respond. Similarly, although the
defendants

were

required

to

respond

to

plaintiff’s

December 11, 2013 motion for summary judgment in January,
2014,

the

defendants

never

responded

to

plaintiff’s

motion, and never sought an extension of time to respond
to the motion.
As a result of the defendants repeated failures to
comply with Court-ordered deadlines; failure to obtain
local

counsel

produce

as

initial

required

by

disclosures;

the

court;

failure

to

failure

to

respond

to

plaintiff’s discovery requests; failure to be available
for the taking of a deposition; failure to oppose or
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respond to plaintiff’s motion for summary judgment; and
defendants’ apparent failure to communicate with their
local

counsel

as

evidenced

by

counsel’s

motion

to

withdraw, plaintiff now seeks an entry of default against
the defendants for failure to appear and prosecute or
defend the remaining claims in this action.

DISCUSSION
I.

Bases for obtaining an entry of default

Plaintiff moves for an entry of default against the
defendants pursuant to Rules 37, 41 and 55 of the Federal
Rules of Civil Procedure (the “Federal Rules”) on grounds
that

the

defendants

have

failed

to

comply

with

the

Court’s Orders regarding discovery, and have failed to
formally

appear

following

the

withdrawal

of

their

previous local counsel.
Rule 37(b)(2)(A) of the Federal Rules provides that
where a party “fails to obey an order to provide or
permit discovery,” the Court “may issue further just
orders” sanctioning the non-compliant party. Such orders
may include, but are not limited to, “dismissing the
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action or proceeding in whole or in part.,” or “rendering
a default judgment against the disobedient party . . . .”
Fed. R. Civ. P.

37(b)(2)(A)(v);

37(b)(2)(A)(vi).

Rule

41 of the Federal Rules provides that where a party fails
to prosecute its claims or fails to comply with the
Federal Rules or a court order, the opposing party may
move to dismiss the action or any claim against it.
R. Civ. P. 41(b), 41(c).

Fed.

Rule 55(a) of the Federal Rules

provides that where “a party against whom a judgment for
affirmative relief is sought has failed to plead or
otherwise defend, and that failure is shown by affidavit
or otherwise, the clerk must enter the party's default.”
Fed. R. Civ. P. 55(a).
II. Plaintiff is Entitled To an Entry of Default and
Default Judgment against the defendants.
It is without question that default judgments are
generally disfavored, Peoples v. Fisher, 299 F.R.D. 56,
58 (W.D.N.Y. 2014)(Wolford, D.J.), and that courts prefer
to

decide

cases

on

the

merits

“whenever

reasonably

possible.” Westchester Fire Ins. Co. v. Mendez, 585 F.3d
1183, 1189 (9th Cir. 2009). However, where a party has

Page -11-

shown no interest in litigating an action, and prejudice
accrues to the party diligently attempting to assert or
protect its rights, courts will not hesitate to grant a
request for a default judgment. See Enron Oil Corp. v.
Diakuhara,

10

F.3d

90,

96

(2d

Cir.1993).

(where

“a

litigant is confronted by an obstructionist adversary,”
the

availability

constructive
efficient

role

of
in

default

judgment

maintaining

administration

of

the

justice.”);

“play[s]
orderly
Fed.

a
and

Nat.

Mortgage Ass'n v. Olympia Mortgage Corp., 2014 WL 2594340
*2 (E.D.N.Y. June 10, 2014).
While it is within the Court’s discretion to decide
whether or not a default judgment should be granted, the
Court may look to numerous factors, including “whether
[the] plaintiff has been substantially prejudiced by the
delay involved[ ] and whether the grounds for default are
clearly established or are in doubt.” O'Callaghan v.
Sifre, 242 F.R.D. 69, 73 (S.D.N.Y. 2007)(quoting

10A

Charles Alan Wright, Arthur R. Miller, & Mary Kay Kane,
Federal Practice and Procedure, § 2685 (3d ed.1998).
Courts may also consider whether or not the default was
Page -12-

wilful, and whether or not there are valid defenses to
the plaintiff’s claims.
782

F.2d

consider

Id.

1470,

1471-72

factors

such

See also

(9th
as,

Cir.,
inter

Eitel v. McCool,
1986)(court
alia,

merits

may
of

plaintiff’s substantive claims, possibility of dispute as
to material facts, and amount in controversy).

In light

of all of these factors, I find that granting plaintiff’s
motion for default is warranted.
Initially,

I

note

that

the

plaintiff

has

been

severely prejudiced by the delay that has occurred as a
result of defendants’ failure to comply with discovery
orders or formally appear since March of this year.
According to an affidavit submitted by attorney Marshall
Sanders,

who

was

admitted

pro

hac

vice

to

assist

defendants’ former local counsel, MHW, the corporation
that I found was liable to Xerox as a result of HMW’s
default of its lease and purchase obligations, has gone
out of business, and is “judgment proof.”

That change in

status occurred during the pendency of this litigation,
and has severely prejudiced Xerox’s ability to recover
monetary damages.
Page -13-

Moreover, I find defendants’ default to be wilful,
and not the result of negligence or mistake.

Defendants’

former counsel attempted unsuccessfully to contact Tabah
for

several

counsel.

months

prior

to

seeking

to

withdraw

as

According to the unrebutted affirmation of

former counsel, Tabah simply refused to communicate with
counsel, or assist in any way with the prosecution of his
counterclaims

or

defense

of

the

claims

against

him.

There is no question that defendants were aware of their
discovery obligations, and obligations to respond to
plaintiff’s motion for summary judgment, but defendants
simply chose not to do so.
directed

by

the

Court

in

Moreover, despite being
February

to

obtain

local

counsel, defendants have failed to do so, and failed to
request additional time to do so.
With respect to the merits of plaintiff’s claims,
plaintiff’s entitlement to relief, and the possibility of
contested material facts, I find that plaintiff’s claims
are meritorious, that Xerox is entitled to the relief it
seeks,

and

that

there

are

no

significant

issues

of

material fact that would preclude granting a default
Page -14-

judgment.

This court has already determined that MHW is

liable to Xerox for breaching its obligations under the
lease and purchase agreements, and therefore, Xerox has
clearly shown that it is entitled to relief.

While

liability was not determined as to Tabah or the remaining
corporate entities, defendants’ refusal to engage in the
litigation process has prejudiced the ability of Xerox to
obtain information that would demonstrate defendants’
liability.

Defendants who refuse to appear and defend

against the claims made against them can not be allowed
to benefit from their actions.

See Ackra Direct Mktg.

Corp. v. Fingerhut Corp., 86 F.3d 852, 857 (8th Cir.
1996) (“where the conduct of a party amounts to willful
misconduct, the existence of a meritorious defense does
not prohibit default judgment.”)

Accordingly, I find

that default against all defendants is appropriate.

See

e.g. Au Bon Pain Corp. v. Artect, Inc., 653 F.2d 61, 65
(2d Cir. 1981)(holding that grant of default judgment
would be appropriate where the defendant failed to appear
for

deposition,

dismissed

counsel,

gave

vague

and

unresponsive answers to interrogatories, and failed to
Page -15-

appear for trial, but reversing grant of default judgment
for other reasons); Hoxworth v. Blinder, Robinson & Co.,
Inc., 980 F.2d 912, 918 (3d Cir. 1992) (holding that the
district court in that case “could have imposed a default
judgment against the defendants for failure to comply
with its own unambiguous orders to obtain substitute
counsel, file a pretrial memorandum, and respond to the
plaintiffs' discovery requests.”).

See also, Hounddog

Prods., L.L.C. v. Empire Film Grp., Inc., 767 F. Supp. 2d
480, 486 (S.D.N.Y. 2011)(granting default motion against
corporate defendants where counsel had withdrawn from
representation, and defendants failed to retain counsel
for four months, and failed to comply with discovery
orders);

Bankers Nat. Life Ins. Co. v. Cont'l Nat.

Corp., 91 F.R.D. 448, 449-450 (N.D. Ill. 1981) (granting
default judgment where defendant failed to retain new
counsel as ordered by the Court, offered no justification
for having failed to retain new counsel, and remained
without counsel for more than five weeks).

Additionally,

because the defendants have abandoned prosecution of
their remaining counterclaims against the plaintiff, I
Page -16-

hereby

dismiss

the

remaining

counterclaims

asserted

against Xerox.
III.

The Request of Attorney Sanders to Proceed
without Local Counsel is denied.

In an untimely submission to the Court, attorney
Marshall Sanders, who concedes that his ability to appear
on behalf of the defendants was revoked when this Court
granted

local

counsel’s

representation,

seeks

motion

to

withdraw

permission

to

represent

defendants, or perhaps only defendant Tabah,

from
the

without

obtaining local counsel, and asks for an extension of
time

to

respond

to

plaintiff’s

discovery

demands.

Attorney Sanders, who asserts that he has represented
Tabah

in

various

capacities

since

1986,

states

that

“[t]hough Mr. Tabah has not avoided me, he has also been
unable to be of much assistance to me in this matter.”
I deny Attorney Sanders’ requests.

Initially, the

requests were made in an untimely manner, well after
briefing

and

discovery

deadlines

passed.

More

importantly, however, it is clear that the defendants,
both Tabah himself and the entities he controls, have no

Page -17-

interest in litigating this matter, or litigating this
matter in a timely manner.

Defendants have had ample

opportunity to obtain local counsel, comply with court
deadlines, or make timely requests for extensions of
time, none of which they have done.

Even in the face of

the current motion for a default judgment, defendants
have been unwilling to defend against such a motion.
Because the defendants have prevented the Court from
resolving this matter in a timely manner on the merits,
and because allowing attorney Sanders to proceed without
local counsel does not appear to the Court to be a
solution to the continued indifference of the defendants
to this matter, the court is left with no option but to
grant plaintiff’s motion for a default.
CONCLUSION
For the reasons set forth above, I grant plaintiff’s
motion for an entry of default, and direct the Clerk of
the Court to enter a default against all defendants.
Plaintiff’s motion to dismiss defendants’ counterclaims
is granted, and plaintiff’s motion for summary judgment
is denied without prejudice as moot. Attorney Marshall
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Sanders’ request for permission to represent defendants
without local counsel is denied.

ALL OF THE ABOVE IS SO ORDERED.
S/ MICHAEL A. TELESCA
HON. MICHAEL A. TELESCA
United States District Judge
Dated:

Rochester, New York
August 7, 2014

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